Medicare Monday: Provider consolidation drives up costs for patients and government

Two recent studies add to a growing body of research on how consolidation is driving up treatment costs. More and more cancer treatments are being administered at hospital outpatient facilities rather than physician offices, and this has real implications for costs.

When the site of care moves from a clinic to a hospital, costs are higher for both the patient and the health care system. With the government’s proposal to change how physicians are paid in Medicare Part B, this trend could be exacerbated, driving up costs for beneficiaries and the government. Here is what these studies found:

The Health Care Cost Institute (HCCI) recently released an issue brief on the impact of provider consolidation. HCCI looked at physician claims between 2008 and 2013 and found a link between rising treatment costs and the number of providers with hospital affiliations. The analysis found a 1 percentage point increase in the share of providers with a hospital or health system affiliation led to a 23 percent increase in average per-person price of treatment.

A study conducted by Milliman for the Community Oncology Alliance, released earlier this month, found from 2004 to 2014 spending on chemotherapy infusions shifted from less expensive physician offices to more expensive hospital outpatient facilities, resulting in a rise in per-patient-per-year costs. Within the Medicare population specifically, the study found 45.9 percent of chemotherapy infusions were delivered at hospital outpatient facilities in 2014, up from 15.8 percent in 2004.

If harmful proposals like the Part B “demonstration” move forward, smaller physician offices will be discouraged from providing – and in some cases unable to provide – specialty treatments, like those for cancer, to seniors, potentially accelerating shifts in site-of-service. These analyses clearly show that proposals like the Part B “demonstration” are penny wise and pound foolish.

Learn more about the government proposed Medicare payment change here, and more on Medicare Part B at PhRMA.org/PartB.